19
THE BUSINESS CASE FOR SOLAR PHOTOVOLTAICS
TECHNOLOGY OVERVIEW
Solar photovoltaic (PV) technology uses
semiconductors to convert solar energy into
electricity. Unit efficiency in terms of electricity
generated compared to solar energy received varies
from around 10% to over 40%, with around 17% most
typical for non-military applications.1 The global
market for solar PV has grown rapidly in recent years,
supported by subsidies in Germany and Spain, which
have increased manufacturing capacity and lowered
unit prices.
IS IT SUITABLE FOR YOUR MEAT PROCESSING
FACILITY?
Solar PV could be an attractive investment option, especially if:


the variable electricity charge at the site is greater than 20 cents per kWh (this factor is based on current
capital costs for Solar PV, the higher the electricity charge, the more favourable the project economics
become); and
the site has either a large roof surface facing north with unimpeded direct sunlight or large areas of
unused land close to where the electricity needed.
HOW TO DEVELOP YOUR BUSINESS CASE
The actions to take when developing a business case for an on-site solar PV generation project include:





Determine the electricity load profile at your facility
Identify suitable buildings or areas for the PV panels
Calculate the electricity generation potential from your PV system
Estimate electricity savings and the capital investment required
Approach the market for a quote for supply and/or installation of the equipment
1
The National Renewable Energy Lab in the US maintains a chart of record solar efficiencies over time, which can be found at
http://www.nrel.gov/ncpv/images/efficiency_chart.jpg (Very large image)
This Activity received funding from the Department of Industry as part of the Energy Efficiency Information Grants Program.
The views expressed herein are not necessarily the views of the Commonwealth of Australia, and the Commonwealth does not
accept responsibility for any information or advice contained herein.
Please note that where commercial services providers are referred in this report, this is for industry guidance only and should not
be considered an exhaustive list of available service providers.
Demand (kW)
Peak load
DETERMINE THE ELECTRICITY LOAD PROFILE
Request your half-hourly interval meter data from
your eelctrcity retailer to determine your load profile.
You should aim to scale your system to meet daytime
base load requirement (see figure 1).
Daytime
base load
Time of day
Spring
Summer
Autumn
Winter
Figure 1: Illustrative seasonal load profiles
Over sizing your PV solar installation can decrease
the profitability of the project substantially, due to
the difference between the cost of grid electricity and
the amount paid for exported electricity.2
It is not recommended to include solar PV as part of a peak load and demand charge reduction strategy. Although
in some instances it may be effective in reducing your peak demand, a single cloudy day could result in your peak
demand returning to the pre-solar PV profile. This could result in the same demand charges as before.
IDENTIFY SUITABLE BUILDINGS OR AREAS FOR THE PV PANELS
Assess whether you have a large enough north facing roof surface with unimpeded direct sunlight or unused land
close to where you need electricity. As a rule of thumb, you will need 10m2 north facing roof/ground space per
kilowatt of solar PV capacity installed.
CALCULATE THE ELECTRICITY GENERATION POTENTIAL FROM YOUR PV SYSTEM
Use the Clean Energy Regulator’s (CER) “Postcode zones for solar panels” list to determine the typical electricity
generating capacity at your location (i.e. MWh of electricity per kWp installed capacity). As an example, a typical
flat panel array in NSW generates approximately 1.4 MWh of electricity per kWp installed capacity per annum.
Output is seasonal; summer and winter insolation in NSW often varies by 50% or more depending on the
location.3
The system output will also vary depending on orientation and tilt angle4 of the solar panels, the presence or
absence of shading and ambient temperature. In some circumstances, efficiency can be increased through the use
of tracking systems (one or two-axis) which can provide an increase of approximately 10% in efficiency. However,
tracking adds significant cost and generally this outweighs the benefit of increased yield.
Solar panels
38%
40%
Inverters and other
components
22%
Installation and grid
connection
Figure 2: Grid connected solar PV - typical upfront system component cost
2
ESTIMATE SAVINGS, INVESTMENT REQUIRED AND
FUNDING SOURCES
In addition to electricity savings,5 also consider revenue
from certificates under the Renewable Energy Target
(RET) Scheme as a co-funding source. You can
determine whether your project qualifies under the
RET Scheme for Small-scale Technology Certificates
(STCs) by referring to the CER website.6 Many solar PV
retailers will purchase future certificates (for an
amount determined by the value of the certificates and
the amount of energy the solar PV system will
generate) upon selling the system (this is known as
‘deeming’) and reduce the sale price by the
corresponding amount.
For a full list of feed-in-tariffs across Australia visit www.energymatters.com.au/government-rebates/feedintariff.php#fit-table
Go to the Australian Solar Energy Information System (ASEIS) http://www.ga.gov.au/solarmapping/?accept_agreement=on to see the variance in average
solar radiation (MJ / day) for your area.
4 The tilt angle of solar panels varies depending on latitude. Solar PV suppliers will model the most appropriate tilt angle for your project however, this is
often set by the roof pitch.
5
It is not recommended to include potential changes in demand charges in the payback calculation.
6 http://ret.cleanenergyregulator.gov.au/About-the-Schemes/Small-scale-Renewable-Energy-Scheme--SRES-/about-sres.
3
At present the upfront cost of a roof-mounted grid-connected solar array is approximately $2 per watt7, once
STCs are deducted. This does not change much irrespective of whether you are installing a 5kW or 100kW PV
system.8 As system size increases, economies of scale apply. However, a reduction in capital costs associated with
equipment is offset by increased upfront cost associated with planning, grid connection, network studies and
project management fees for larger projects. The intersection of these factors, in addition to load requirements
and space, will influence the optimal project size.
Most PV panels have a warranted life of 25 years, and inverters typically closer to 10-years, but warranties vary
depending on the manufacturer. Solar panel costs continue to fall, although at a slower pace than in recent years.
Generally, solar panels constitute less than half the cost of a system as illustrated in Figure 2. Other variables to
consider when costing your system include whether the system is grid connected, roof mounted or ground
mounted, and whether storage capacity is required and how much.
The costs of an off-grid solar PV system tends to be higher due to additional auxiliary equipment such as energy
storage systems, as shown in Figure 3. If security of supply is critical, back-up diesel generators may also be
required for periods when the solar system does not generate electricity.
Ground mounted systems are often about 10% more expensive than roof mounted systems due to the
requirement for additional civil engineering works such as concrete footing and piles.

Electricity to
facility
(AC)
Grid electricity
import




PV electricity
export
PV electricity
output (DC)


Solar PV Panels
 Batteries and charge regulator
 Inverter  Abattoir
 Meter  Electricity Grid
Figure 3: Schematic of a grid connected PV system with battery storage
APPROACH THE MARKET FOR A QUOTE
Once you have determined the viability of your project, you should approach the market to quote for the supply
and installation of the equipment. The installation and wiring of solar panels must be undertaken by a licensed
electrical contractor (or the holder of a qualified supervisor certificate). If the solar installation needs to be
connected to the electricity distribution network, contact your network provider to determine connection
requirements. Generally the installer can install the panels and inverter, but the network provider is required for
the connection to the grid.
7
http://www.businessspectator.com.au/article/2013/11/14/solar-energy/solar-pv-price-check-%E2%80%93-november.
For example, the average price per kW for a 5kW system in Sydney, excluding government incentives, is approximately $2,300. STCs typically accounted for
a discount of about $680 per kW for the Zone 3 cities such as Sydney. Retrieved on 1 October 2013 from: http://www.solarchoice.net.au/blog/solar-pvprice-index-september-2013/ ; Also see other system price estimates at http://www.solarchoice.net.au/blog/30kw-commercial-solar-power-installationsand-solar-farms-price-output-returns/ and https://www.standardsolar.com.au/new-solar-systems/100kw-solar-system.
8
If you wish to claim any State or Federal Government rebates, including STCs for the installation of solar panels,
you should ensure the installer you use is accredited by the Clean Energy Council (CEC). A list of accredited
installers is available on the CEC website (www.cleanenergycouncil.org.au). Every installation carried out by an
accredited installer is required to meet the Australian Standards for installation9 and products. The Clean Energy
Council has compiled a list of approved products - including solar PV modules (panels) and grid-connect inverters that meet these standards that can be accessed at www.solaraccreditation.com.au/approvedproducts.
EXAMPLE COST-BENEFIT ANALYSIS
Following is a simple example CBA based on high-level assumptions about site energy use. More detailed energy
use data will better inform your decision, particularly when considering the proportion of electricity which is used
during the day. Best-practice would be to use a model based on usage data, which compares potential generation
with use, and determines the most appropriate size by maximising on-site energy use.
A more simplistic determination can be made based on the assumptions listed in Table 1. The average daytime
electrical load for each season can be calculated using the formula below, with the results presented in the last
column of the table.
The consumption figure should be taken from your electricity bills or be provided by your electricity retailer. The
percentage of daytime use is typical for commercial installations and will change extensively for businesses which
operate continuously, which could lead to daytime electricity use closer to 50% or 60% of total electricity use. The
daytime hours estimate could be shaped to reflect seasonal variance, using data from the Bureau of Meteorology,
but assuming 12-hours year round is satisfactory. The difference between summer and winter day-length
decreases further north in Australia.
Daytime electrical load (kW) =
(Electricity consumption (kWh) x percentage energy use in daytime) / daytime hours / days in season
Season
Summer
Autumn
Winter
Spring
Total
Consumption
(kWh)
165,600
136,500
150,150
163,800
616,050
% of electricity use in
daytime
80%
80%
80%
80%
Daytime hours (6
am and 6 pm)
12
12
12
12
Days
92
91
91
91
365
Daytime electrical
load (kW)
120
100
110
120
Table 1: Key assumptions
Based on the seasonable variability of the load at the example site detailed in Table 1, a 100kW solar PV system is
recommended (i.e. 80% of the spring daytime load). This is a very conservative estimate that ensures onsite use is
maximised, but larger systems could be favourable given more detailed calculations.
You will need to assess whether there is enough space to install this system.
Suitable space required (m^2 )=100kW ×10 m^2 per kW =1000 m^2
Then calculate the electricity generation potential from your PV system, assuming the site is located in ‘Zone 3’10
with an electricity generating potential of 1.4 MWh per kW capacity (see Clean Energy Regulator postal code list).
Electricity generation potential (MWh)=1.4 MWh x 100=140 MWh
9
AS4777 Grid-connections of energy systems via inverters, AS/NZS 3000 Electrical wiring rules, AS1768 Lightning protection, AS/NZS 1170.2 Wind loads
and AS/NZS 5033 Installation of photovoltaic (PV) arrays
10 Refer Clean Energy Regulator website for more information http://ret.cleanenergyregulator.gov.au/Forms-and-Publications/Publications/calculations_stc
Assuming the price paid for electricity is $0.25/kWh, the annual energy savings of $35,000 are anticipated (i.e.
140MWh x $250/MWh). At an STC value of $680 per kW or $68,000 for this system, the payback period is
reduced by two years. The value of STCs is typically discounted at the point of sale.
A preliminary assessment of the financial viability of a standard grid connected roof mounted solar PV installation
is presented Table 2. These calculations do not account for future energy price increases and assumes no
financing costs. It is further assumed that 100% of the energy is used to displace facility electricity use. A potential
reduction in peak demand changes are not included, for reasons stated in the previous section.
PV system
capacity
Upfront cost
($)
Upfront
cost / W
installed
Annual
electricity
production
(MWh)
Simple payback on
standard installation
without incentive
Payback with existing
incentives (i.e. STCs)
100kW
$220,000
$2.20
140
6.3 years
4.3 years
Table 2: Illustrative simple payback